BNY Mellon is among the first US transfer agency providers to automate the notifications that broker-dealers send to mutual fund complexes when large trades in their funds are imminent.
"This automation process reduces the communications period for the broker-dealers and the fund complexes, lowers the probability of an error, and streamlines the overall process," says Michael DeNofrio, managing director and global head of transfer agency services for BNY Mellon. "The industry need for automating this process has become more acute as mutual fund complexes have been lowering the threshold for requiring advance notification. In the past, advance notification was required for trades of at least one million dollars. Now, we are seeing fund complexes ask for advance notification for trades in the USD100,000 range."
Fund complexes require advance notification of large trades so they can manage their cash flow efficiently. The fund managers require cash when broker-dealers sell shares in mutual funds. The managers also need to prepare for the cash inflows that result when broker-dealers buy shares in the funds on behalf of their investors.
Prior to the introduction of the new service, broker-dealers would alert the transfer agent by phone or email that the trade would be coming, and the transfer agent would then contact the mutual fund manager. Under the new system, the broker-dealer signs in to the BNY Mellon AdvisorCentral web portal and provides detailed information about the upcoming trade, including the expected trade date, trade amount, and the trade settlement timeframe.
The mutual fund complex and BNY Mellon, as the transfer agent, receive the information simultaneously. The AdvisorCentral web portal is commonly used in the industry by broker-dealers and financial advisors seeking easy access to consolidated mutual fund and 529 plan data.
"This is another example of where our market leadership provides opportunities to be the industry's productivity and technology leader, with the highest automation and lowest costs," says DeNofrio.